Decided on August 16,1974

Regional Director Of E.S.I. Corporation Appellant
Oosmanian Tile Works, Alwaye Respondents


P.SUBRAMONIAN POTI,J. - (1.) THE Regional Director of the Employees State Insurance Corporation is the appellant here.The appeal is against the order of the Employees Insurance Court,Kozhikode on an application under section 75 of the Employees ™State Insurance Act,1948.The firm Messrs.Oosmaniya Tile Works,Alwaye moved the Insurance Court for a declara­tion that the managing partner of the firm is not an employee of the firm in respect of whom contribution was payable to the Employees State Insurance Corporation.Such contribution was demanded by the Corporation merely by reason of the fact that it was seen that the managing partner was being paid a monthly salary of Rs.250 in addition to his share of profit.The court which was so moved under section 75 of the Act did not accept the case of the Corporation.It held that the managing partner of the firm cannot be said to be an employee on whose account contribution was payable under the Employees ™State Insurance Act.That view is challenged in this appeal.
(2.) ˜Employee ™is defined in section 2(9)of the Employees ™State Insurance Act,1948 as follows: ( 9)˜employee ™means any person employed for wages in or in connection with the work of a factory or establishment to which this Act applies and " (i)who is directly employed by the principal employer on any work of or incidental or preliminary to or connected with the work of,the factory or establishment,whether such work is done by the employee in the factory or establishment or elsewhere;or (ii)who is employed by or through an immediate employer on the premises of the factory or establishment or under the supervision of the principal employer or his agent on work which is ordinarily part of the work of the factory or establishment or which is preliminary to the work carried on in or incidental to the purpose of the factory or establishment;of (iii)whose services are temporarily lent or let on hire to the principal employer by the person with whom the person whose services are so lent or let on hire has entered into a contract of service; and includes any person employed for wages on any work connected with the administration of the factory or establishment or any part,department or branch thereof or with the purchase of raw materials for,or the distribution or sale of the products of,the factory or estab­lishment,but does not include " (a)any member of the Indian Naval,Military or Air Force;or (b)any person so employed whose wages(excluding remuneration for overtime work)exceeded five hundred rupees a month: Provided that an employee whose wages(excluding remuneration for overtime work)exceed five hundred rupees a month at any time after(and not before)the beginning of the contribution period,shall continue to be an employee until the end of that period. To the latter part of the definition an inclusive clause was added by Act 44 of 1966 and that was evidently intended to extend the benefit of the provisions of the Act to the employees working in connection with the administration of the factory or the establishment or working in any department or branch concerned with the purchase of raw materials for or the distribution or sale of the products of the factory or establishment. It is the case of the Corporation that the definition indicates that what is necessary to bring any person within the scope of the term employee is only employment for wages which should necessarily be taken as meaning ˜being engaged for wages &rsquo ;.The word ˜engaged ™in the context in which it appears,should,it is submitted by Sri Sankaran Nair,the learned counsel,be understood as referring to ˜working for wages in the factory ™and not ˜working in the capacity as one employed by another &rsquo ;.In other words the word employed is not to be understood as referring to a relationship of employer and employee but to an activity of employment in connection with the work of the factory or establishment.
(3.) I have already indicated that the inclusive part of the definition was intended to extend the scope of coverage of the term ˜employee &rsquo ;.Therefore it appears to me that the category of persons who are brought within the definition by reason of such inclusive clause would be of the same character as the category of persons enumerated in clauses(1 ),( 2)and(3)of the sub -section.All these clauses refer to employment by the employer whether it be the principal employer or the immediate employer.Definition of a term is necessarily for the purpose of application in the other provisions of the Act.Section 38 is the provision which relates to the obligation for insurance in regard to all employees and that reads: Subject to the provisions of this Act,all employees in factories,or establishments to which this Act applies,shall be insured in the manner provided by this Act. Section 39(1)is also relevant in this context and that reads: The contribution payable under this Act in respect of an employee shall comprise contribution payable by the employer(herein­after referred to as the employer's contribution)and contribution payable by the employee(hereinafter referred to as the employee's contribution)and shall be paid to the Corporation. The very fact that the contribution payable by reason of compulsory insurance provided in section 38 is to be both by the employer and the employee indicates that the word ˜employee ™has necessarily to be read as referring to one who is employed by another.In other words the term employee which has relationship to employment must be understood as one who is working under a contract of service.If so read there is no scope for considering the managing partner of the firm as an employee of the firm for,if a person happens to be an employer,he cannot be an employee also,as these terms are normally understood.Of course the position must necessarily be different if there is a specific provision on this behalf in any statute,as for example,the one with which this court had occasion to consider in the decision reported in Insurance Inspector v.Victory Tile Works 1973 KLT 927.Though the learned counsel for the Corporation would rely on this decision to find support for his contention,I do not think that it is of any assistance to him for,the question decided there was whether a person could be an employee as well as a principal employer as these terms are defined in the Act.There of course it was conceded that the manager working as such was an employee and he also fell within the definition of the term ˜principal employer ™which specifically referred to the manager.The position here is different.The question is not whether a person can be the employee and the employer at the same time but whether a managing partner is an employee.It is in this context that I find that he cannot be for the simple reason that he is not a person employed by anyone else.He is an employer as the other partners are and there cannot be a contract of service between him as the employer on the one hand and as employee on the other.;

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